US Geothermal's (HTM) CEO Dennis Gilles on Q2 2016 Results - Earnings Call Transcript

| About: US Geothermal (HTM)

US Geothermal Inc. (NYSEMKT:HTM)

Q2 2016 Earnings Conference Call

August 10, 2016 13:00 ET

Executives

Dennis Gilles - CEO

Doug Glaspey - President & COO

Kerry Hawkley - CFO

Analysts

Gerry Sweeney - ROTH Capital

Jim McIlree - Chardan Capital

Chip Richardson - Wedbush Securities

Brian Lee - Private Management Group

Operator

Greetings and welcome to the U.S. Geothermal 2016 Second Quarter Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Dennis Gilles, Chief Executive Officer. Thank you. Please go ahead.

Dennis Gilles

Thank you, Brenda. Hello, everyone and welcome to our second quarter, or first six months of 2016 earnings call. Today, I am joined by Doug Glaspey, our President and Chief Operating Officer; and by Kerry Hawkley, our Chief Financial Officer. Our earnings release was issued yesterday and can be found on our website at www.usgeothermal.com under the tab News, and a slide presentation is accompanying today's call. And that can be accessed on our company website, on our Home Page, under Upcoming Events, over in the right-hand side of the screen.

In that slide stack, I'd like to call your attention to Slide 4. U.S. Geothermal's three operating plants all performed well during the quarter except for a forced outage event at our San Emidio facility and a production pump breakdown at our Raft River facility. For the first six months, our financial performance remained slightly short of our expectations due primarily to some one-time fees associated with the engagement of financial and marketing advisors, engaged to assist us in getting our stock price to a level that better represents the value of our assets. In spite of those impacts, we are pleased to have produced our 15th straight quarter of positive EBITDA and cash flow. This past quarter, we completed and closed an attractive $20 million debt facility with a 5.8 interest rate, which has the potential to be expanded up to $50 million.

In these past few months, we've begun drilling and we have three drill rigs operating to advance some of our 96 megawatts of advanced development projects. We are also pleased to have been selected by the United States Department of Energy for a $1.5 million grant to advance our resource investigation for two of our advanced development projects, our Crescent Valley and our San Emidio2 projects. In addition, we've taken steps to strengthen our company by proposing the expansion of our Board of Directors by two additional independent directors. And we've put forward to our shareholders a proposal -- a share consolidation proposal to right-price our stock, increasing the accesses to our stock by interested investors while moving away from being termed a penny stock.

Now, I'm going to ask Doug to provide more details on operations and development shortly, but first I'm going to turn the meeting over to Kerry Hawkley, our CFO, for an update on our financials. Thank you.

Kerry Hawkley

Thank you, Dennis and good morning to our investors on this call. Before I begin, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives and expectations for future operations and are based on management's current estimates and projections of future results or trends.

Actual future results may differ materially from those projected as a result of certain risks and uncertainties. During the call, we will present non-GAAP financial measures, such as EBITDA, adjusted EBITDA and adjusted net income. Reconciliations to the most directly comparable GAAP measures and management's reasons for presenting such information are set forth in the press release that was issued last night. Because these measures are not calculated in accordance with U.S. GAAP, it should not be considered in isolation from our financial statements prepared in accordance with GAAP.

I will now discuss the financial statements of U.S. Geothermal for the six months ended June 30, 2016. Our financial statements and MD&A were prepared in a condensed format. Please view the data on the slides as we describe the items of note. On Slide 5 -- actually Slide 6, we have our balance sheet. U.S. Geothermal's balance sheet is strong, providing a solid base for current and future growth. Cash and cash equivalents, restricted cash and bonds, and notes payable increased during the quarter due to the $20 million Prudential financing in May of 2016. Our issued and outstanding shares of common stock at June 30, 2016, totaled 113,086,000 shares.

Our statement of operations on Slide 7, our results of operations for the past six months were consistent with our expectations. Revenues for the year-to-date were $14.2 million, down 1.2% from the same period in 2015. Planned expenses were $7.8 million, down 1.7% from 2015. Gross profits, or income from plant operations remains consistent at $6.4 million. All of this was accomplished despite a mechanical issue with pumps at Raft River and San Emidio. A one-time charge of $750,000 in Q1 for the review of strategic alternatives and a one-time charge of $53,000 in Q2 for marketing services increased our corporate overhead costs a total of $906,000 for the six months.

Net income attributable to U.S. Geothermal was a loss of $0.34 million in 2016 compared to income of $0.50 million in 2015 again reflects the effect of the one-time adjustments for corporate overhead costs mentioned previously and the effects from a larger percentage of gross profits being dry for Neal Hot Springs and Raft River, where profits are shared.

Adjusted EBITDA for U.S. Geothermal for the six months of 2016 remains positive at $4.28 million; our statements of cash flow is on Slide 8. We began the year with cash and cash equivalents of $8.7 million. We ended the second quarter with cash and cash equivalents of $18.3 million. Cash generated by operations was $5.7 million. Issuance of common stock generated $2.3 million and the net proceeds from the Prudential financing totaled $19.2 million. We have made principal payments to reduce our debt of $3 million. Payments to our partners were $2.5 million. Funding of restricted cash reserves totaled $8.1 million. We had $3 million earmarked for the redrilling of well RRG-2 at Raft River. Our purchase of an additional interest at Raft River Energy was $1.6 million and capitalized development costs at WGP Geysers and El Ceibillo totaled $2.4 million.

The company has a solid financial base. We're well positioned to act on any future opportunities resulting from our organic growth or any potential M&A activities. I'd like to thank you for your continued interest in U.S. Geothermal.

I will turn the call over to Doug Glaspey, our President and Chief Operating Officer.

Doug Glaspey

Thank you, Kerry. Good day, everybody and thank you for joining us on the earnings call today. We've had a business quarter, to say the least. Data from our operating plants starts on Slide 10.

Our total generation for the second quarter from all three facilities was 68,880 megawatt hours. For the first half of the year, total generation was 162,667 megawatt hours, compared to 158,872 megawatt hours for the first half of 2015. You can see that our overall availability is down about 2% from last year, and that is the basic difference in our generation so far this year. We've had a couple mechanical issues as has been mentioned at two of our facilities that have been corrected, and we expect to make up some of that lost generation through the second half of the year.

At Neal Hot Springs, which is on Slide 11, our generation for the second quarter averaged 18.8 net megawatts per hour of operation and the unit operated at 99% availability. I would note here at Neal that our availability is coming up; we've now got this plant up to our, what we consider to be par; 98% to 99% availability is what we like to see, and we've got there now with Neal Hot Springs. Unit 1 and Unit 2 had their annual maintenance outages during the quarter and Unit 3's outage is planned for the third quarter. In drilling for fresh water, which we'll talk about a little more later to support the hybrid cooling system is planned for the third quarter.

Referring to Slide 12, San Emidio, generation for the second quarter averaged 8.1 net megawatts per hour of operation and San Emidio operated at 84.7% availability. Our annual maintenance outage was taken in late April. We installed a new high-pressure pump, which started to degrade after about a week of operation and the plant had to be operated at reduced output for an extended period until a replacement pump could be gotten to the site. That pump was replaced in June and the plant has been operating at full output since then without issue. At Raft River, on Slide 13, generation for the second quarter averaged 7.7 net megawatts per hour and Raft operated at 97.6% availability for the quarter. They took an annual maintenance outage in May. We have had production well RRG-2 offline since February when the pump suffered mechanical issues. That pump was pulled in March and the well remained offline pending the completion of the planned redrill on the well. Our operation team continues to provide strong performance from each of our power plants.

On Slide 15, looking at our growth projects, we're focused on three areas: expanding our existing operations, developing our existing portfolio of advanced projects -- and this is where our drilling comes in, and of course we continue to examine potential acquisitions.

On Slide 16, at Raft River, we're modifying existing production well RRG-2 by adding a second production leg on the well. We kicked off the new leg at approximately 3,500 feet deep and drilled to a total depth of 5,605 feet, after penetrating through the reservoir-hosting geology. The drilling phase was completed on July 29, and after moving the rig off the well, we're preparing to run a series of flow tests so we'll give us the data we need to size the new pump. With well head modifications and the new pump being manufactured we expect that the well will be back in production in early September.

At Neal Hot Springs, after an extended delay as we sought the necessary approvals, we're preparing to drill one of two fresh water supply wells as we seek enough water to support our hybrid cooling project. These will be eight-inch-diameter exploration wells to test potential aquifers and I'll remind everybody, we need a minimum of 600 gpm of fresh water and can use up to 1,000 gpm for the hybrid cooling system.

On Slide 17, we'll jump to drilling activities at San Emidio Phase 2. Permits for that second phase building program to deepen two of the most restrictive gradient wells we've drilled in 2015 were approved by the Bureau of Land Management and the state of Nevada on July 19. We started drilling on July 22, and the first well, 1721, was completed on July 25 after we encountered a high-permeability zone at 1,766 feet deep, with a measured flowing temperature of 319°F. Drilling on the second well, 2521, began on July 28 and was completed on July 30.

Again, a high-temperature, high-permeability zone was encountered at 2,206 feet deep and a flowing temperature of 322°F was measured during the shared flow tests. These well caps will be about 1,700 feet apart, so we are defining a fairly large structure on this resource. Longer-term testing will be performed during third quarter to assess the highest average area of the reservoir and to provide data for the numerical reservoir model. Additional drilling will be needed and permitting for these activities will be started in the near term. Also at San Emidio2, we have received a draft interconnection agreement from NV Energy to increase our transmission capacity to 19.9 megawatts from our current level of 16 megawatts. This increase will provide transmission needed for the Phase 2 power plant and pending the PPA, we will continue to set the stage for construction to begin on the project.

At El Ceibillo, we began drilling in June on well EC5, which is a full-size production well. The well intersected a high-permeability zone at 623 feet deep, 190 meters, and the slotted liner was installed to allow testing. And this [indiscernible], well was measured at 371°F or 180°C. After testing, the decision was made to proceed to continue drilling the well to the original target depth, approximately 1,300 feet, or 400 meters. Drilling operations are currently under way and once the well is completed, the flow test will be conducted with field-wide monitoring in three wells: EC2A, EC3 and EC4, all of which intersect in this resource, to provide pressure data back to the reservoir model.

The 40-megawatt geothermal exclusive RFP that had been proposed for 2016 has been delayed until 2017. But it's now expected that the Guatemalan government will issue an open renewable RFP in 2016 for 120 to 140 megawatts. We plan on submitting the proposal to this RFP when it's issued.

And last but not least, on the Geysers, our design engineering is continuing through the quarter, principally on the hybrid cooling system and budgetary costs have been received from equipment suppliers, including turbine manufacturers. The final terms for the Sonoma County conditional use permit are being outlined and we expect to have that permit issued during the second half of this year.

The drilling and reservoir testing progressing at El Ceibillo, significant new drill results at San Ebidio that support the Phase 2 plant, and the last permit will soon be in place for Geysers. The stage is set for the company to move up to the next level of power generation.

And now, I will turn the call back over to Dennis.

Dennis Gilles

Thank you, Doug. Now I'd like to call your attention to Slide 18. As noted in a prior call, at the end of last year, we acquired the majority of the ownership interest in the Raft River project from our partner, Goldman Sachs. In doing so, we were successful in increasing our shareholder portion of our 45-megawatt portfolio, from around 30 megawatts to now 36 megawatts. I'm pleased to note that since completing that acquisition, we have received a cash distribution from that project already this year, totaling $1.2 million.

We recently completed the drilling of the second leg of well RRG-2 at that project and we're awaiting those results, which we expect in September. While these past six months, we have incurred some one-time financial and marketing advisory expenses that totaled nearly $900,000, we have incurred some lost generation due to a forced outage and a production pump breakdown, we are confident that we can improve our performance and achieve results that fall within the previous guidance that was provided.

Moving to Slide 19, I'd like to reaffirm that guidance. Our 2016 consolidated guidance based on current operations only, we expect operating revenues between $29 million and $34 million, adjusted EBITDA between $15 million and $19 million, EBITDA between $14 million and $18 million, and net income as adjusted between $4 million and $8 million. I also wish to affirm our guidance that we had provided previously for the U.S. Geothermal only, that's the portion less minority interests, or the portion that would be associated with our shareholders. For that, we expect adjusted EBITDA of $9 million to $12 million and net income as adjusted at $1 million to $4 million.

On the development slide on Slide 20, while there's many drivers to successful completion of our 96 megawatts of advanced stage development projects, one of those is to obtain a power purchased agreement, or PPA, for each of those projects. To remind you, a PPA is a contract with a buyer for all of the output that's going to be generated by that plant for the next 20 to 25 years, and at a fixed price. We've responded to four RFPs, or requests for proposals, earlier this year. While we were shortlisted by some of the potential buyers, unfortunately our bid was passed over for lower-cost existing geothermal power, which was bidding against us. The existing geothermal plants, being fully paid off, are able to offer their power at a much lower price than ours. It is our understanding that the surplus of this existing geothermal power that was uncontracted, has now been exhausted and we will not -- they will not be bidding against us in the coming RFPs later this year.

The interest in the market for base load, renewable electricity continues to grow, with an example being the recent announcement in California by Pacific Gas and Electric that they're going to be closing their base load Diablo Canyon nuclear power plant, which produces 2,300 megawatts, and replacing it with renewable power. We're confident that geothermal is the best form of renewable energy and we intend to work hard to ensure we continue to grow this company for the benefit of our stockholders.

Now, operator, I'd like to open the call up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Gerry Sweeney with ROTH Capital. Please go ahead with your question.

Gerry Sweeney

Hey, good morning, guys, how are you doing?

Dennis Gilles

Good morning, Gerry. Doing well.

Gerry Sweeney

I have a question on the PPA slide, on the Geysers. I guess you bid on four PPAs. Can you maybe describe to us what the opportunities for additional PPAs look like ahead in this year? How many are there? Are they geothermal specific or is there a wind and solar involved in those? And then also is there any opportunity maybe with the community choice aggregator negotiating directly?

Dennis Gilles

For the communities, those are all good questions, Gerry. We have a number of different party [ph], types that are out soliciting proposals who are interested in renewable power. We have utilities, we have municipalities, which are a collection of cities, we have community choice aggregators, which are a new breakaway from the utilities in California. And those are being formed rather rapidly. And then we have the fourth choice, being large consumers, large industrial customers who are out procuring their own renewable power. We're responding to all forms on these. The first three, for the most part, have limited themselves to competitive solicitations, so they're not open to bilateral negotiations. While we've attempted that, while they have been open to that in the past, the current mode that we've seen is that they're not open to com -- they're not open to bilateral negotiations which is where just sit down across the table and negotiate an agreement. They're requiring a competitive solicitation.

And then the fourth category, the large industrial users, those are open to bilateral negotiations. We are pursuing all four of those types, and have been, over the last many months. The challenge for us has been while geothermal is viewed as a more attractive power supply because of its base mode nature and its predictable nature, unlike the wind and solar intermittence, the demand for wind and solar has been high but the demand for the base load, whether it's by new geothermal or by new biomass, who are the two that are competing in that market predominantly, the demand by the existing geothermal -- or the ability of the existing geothermal to meet that demand has kind of locked us out of the market. With them out of the way, there are additional RFPs coming out in the latter half of this year. We're aware of one for sure, from one of the community choice aggregators, it's our understanding that one of the utilities is coming out with one later this year, and one of the municipalities is coming out with one later this year. So we are planning to respond to those RFPs as they come out.

Gerry Sweeney

And then one quick question on the other pump outage, I think you said it was Raft River. Was that a -- it sounded like it was a new pump that was installed that degraded rather quickly, failed rather quickly. Was that an issue of user error, installed incorrectly, was there an opportunity for any sort of remuneration from insurance or anything along those lines?

Dennis Gilles

There were really two major -- two pump outages that occurred during the quarter. One of them was at Raft River; it was the pump that supplies the production brine to the power plant. And that's not the one that you're referring to. The second pump outage was related at San Emidio that was to the refrigerant pump at the plant. That plant -- that pump had been replaced during the April outage, the pump failed and was eventually replaced in June. The June pump replacement's working great. The one that was replaced during the April outage that failed has been sent to the manufacturer. The manufacturer's disassembling it and doing the forensic analysis right now. So, really, Gerry, it's too soon to say what the cause was and what to expect of that is, we really don't have an insurance claim for it. The downtime wasn't enough to trigger our -- the minimums of business interruption.

Gerry Sweeney

Got it. And then one quick item. Just one related to the marketing issue. Do you have any of that the second half or is that purely the first half? I know the one in Q1 was just strategic review, that's done. But any type of marketing or increases on that part in the second half that we should be aware of just for modeling purposes?

Dennis Gilles

The marketing that we initiated will wrap up, I believe it's toward the end of the third quarter.

Gerry Sweeney

Okay, got it. That's it from my end. Thank you very much.

Dennis Gilles

Great. Thanks, Gerry.

Operator

And our next question comes from the line of Jim McIlree with Chardan Capital. Please go ahead with your question.

Jim McIlree

Yes, thank you. Can you tell me what needs to happen now to complete the expansion, the 3-megawatt expansion at Raft River? What else needs to be done there?

Dennis Gilles

At Raft River, the drilling is now completed. We're in the process right now of setting up the flow equipment to flow test the well. That's going to take several weeks to do the series of flow tests that are necessary and then procure the pump. The parts for the pump typically are off the shelf, so within the next couple of weeks, we anticipate the delivery of the pump and reinstallation of the well, and putting the well back into service.

Jim McIlree

And there's no amendments to the PPA or another connection agreement? I mean all that's done, so it's just a matter of --

Dennis Gilles

A transaction agreement for the project allows for the full 13 megawatts, the power purchase agreement allows for the full 13 megawatts. So that project has always had the ability to have its output increased, but there was an unwillingness on the ownership partners to put forward the capital. But, you know, that unwillingness was removed with the acquisition of the majority interest of Goldman at the end of last year.

Jim McIlree

Right, right. And then is that -- is that increase in -- at Raft River, is that incorporated into the guidance that you presented?

Dennis Gilles

No. Because we really don't know yet what level of output from that pump is. It's premature, we haven't done our flow test. We literally just finished drilling.

Jim McIlree

Got it. The Department of Energy -- is it a grant or is it a --

Dennis Gilles

It's a grant.

Jim McIlree

A grant. So can you explain to me a little bit about what it is that you're required to do for that project?

Doug Glaspey

Yes, Jim, this is Doug. It's a cost-shared grant at $1.5 million roughly is the -- roughly is the round number; 1.5 from the DOE is their portion of the grant. It wilts down to around $450,000, let's say. So it's really about a $2 million program. What that's paying -- either paying for or providing in kind about 21% of the total. So that money will be used over the next year to do some geophysics that we think could give us good targeting for height permeability zones in these reservoirs. And then at the end of that program we will be able to drill we hope two wells, one at Crescent Valley potentially, another one at San Emidio. We'll identify targets and then we will drill the best target. And then if we are more acceptable -- if we're successful we may have a new tool in our tool belt and in the geothermal industry tool belt to define these zones.

Doug Glaspey

And just to point out the cost of drilling those two wells is part of that grant funds.

Jim McIlree

Is the technology that is developed with this grant that your proprietary technology or is that BOE -- we'll share it with the industry.

Doug Glaspey

It will be shared with the industry.

Jim McIlree

Okay. Great. And then the Neal water project, Doug I know you talk about that but it's hard for me to tell if you're more optimistic, less optimistic or equally optimistic now verses three months ago and then I thought that there was a possibility that you could increase production yield even if he didn't provide water so. That's still a possibility.

Doug Glaspey

So your first question, I remain optimistic I mean we'll know after we drill a well. It's always what we get after you drill a well is the question then and if we find water then of course we're extremely optimistic that we can go forward with the hybrid cooling project. We also have another course of action to take in that is to treat our Rain and produce our own water, and that would be used in our old system or reverse osmosis system which is well known technology. We just haven't done down that path yet. We do have room in that PPA we've got about three annual average megawatts where we have room. It actually increase our Rain flow a little bit this year. And we're looking at some other options to continue to increase that Rain flow the squeeze out a few more megawatts. We don't have numbers on those yet.

Jim McIlree

Okay. I am sorry to make you repeat a little bit about what's going on LCBO [ph] because I am not quite sure I understood what was happening.

Doug Glaspey

What happened was we started drilling our well our target was 1,300 feet deep. We had a lot circulation or high permeability zone that half the distance which was a little unexpected quite frankly. And because it was a total lock circulation of drilling influence -- you know we were -- felt compelled to test that zone, see how it was plugged into the reservoirs. So we ran an aligner, ran -- set up the equipment, ran some implode test on, got some data it really wasn't what we wanted, not quite as high as we'd like we know that 400 meter deep, or 1,300 deep zone is hotter in this particular zone. So we elected to pull the liner, Will cement this zone and then we'll drill down to our original target, so we are still in the middle learning curve on the resource. You know we drilled four wells before this never hit his shallow zone so that's where we we're a bit surprised but that's what mother nature has in store for us is always a bit of a surprise, so we're just going to your original target now, we expect to find the again high permeability. And then will test that zone which will be higher temperature. And though we'll see what that does is for the reservoirs concern.

Jim McIlree

And on the PPA [ph], gone from a geothermal to now an extended renewable PPAs; did I understand that correctly?

Doug Glaspey

Yes and our understanding is that this year's open renewable PPA that'll be 120 to 140 megawatts has not impacted the Geothermal only which is now again expected to come out next year, so we expect if we are successful this year next year we'll have a 40 megawatt Geothermal PPL, Geothermal RFP to get it into early this year, and that's expected early next year. Personally I like to be successful in this year's open renewable RFPs so maybe what happens next year will affect us.

Jim McIlree

Alright, because I just want to make sure I understand so now you can get on the open CPA if for whatever reason you felt you are not successful there can you have it only Early next year.

Doug Glaspey

That's correct.

Jim McIlree

Okay sounds that sounds great thank you.

Doug Glaspey

Thanks, Jim.

Operator

[Operator instructions] Our next question comes from Jeff Grant [ph] with Northland Capital Markets. Please go ahead with your questions.

Unidentified Analyst

In Guatemala, Dennis, I think you talked, maybe last call, that you thought these deals to be your project stacked up pretty well against other geothermal projects that you potentially competing with on that Geothermal exclusive RFPs more kind of broader one coming up first, how would you kind of characterize you know how can this project could pack up with other renewable project given that that [ph] you guys be taking down there?

Kerry Hawkley

Well, that's a good question and it will be interesting. We are seeing lower intermittent prices and wind and those are occurring down in Central America as well. The interest in the country though is for base load generation. So my guess -- I really don't know how their evaluation is going to go, they will receive a host of bids from a number of bidders in this broader solicitation. And then I think it's up to them the government of Guatemala to determine out of that collection of bids which portion they would like to get has intermittent, which portion they would like to have as base load generation. And we really don't have any indication on what -- How that that selection is going to go on area.

Doug Glaspey

The solicitation the off -- the actual out takes which is not necessarily the government are the same people were there were asking for the Geothermal exclusive RSO the same guys are going to be in this RFP if they like our numbers they want to take Geothermal early, they'll take this one.

Unidentified Analyst

Okay great that that's helpful color. and then back on the on ramp impact was going to happen now with this new production line and it is still early but any kind of hints or leads or anything you've seen today that would lead you to believe how to provide the 4.1 megawatt to 3 megawatt range for that, anything kind of lead you to believe where on that range goal or is it still early to call point.

Dennis Gilles

It's still too early to call the only thing we know is the way we drill that leg we block off the existing leg we put a plug in it. We drilled a new leg and once we are completed with drilling we remove the plug from that first leg, we've had that. But wall that first leg was still plugged we had grilled the second leg. The second leg was under pressure and was flowing to the rig so we know we intersected Geothermal fluid, the volume of that fluid we don't know and we won't know until the flood testing is completed, so we have completed we did put a liner down that leg, so that the hall is secure from doing any kind of collapsing or falling into anything having any problems. And that we remove the plug successfully from that original leg and both legs are now available to produce and we're going to begin testing. And I think that's beginning later this week.

Doug Glaspey

Tomorrow.

Dennis Gilles

Tomorrow. So I was excited its real time I mean it -- and it takes it a series of tests that are performed, so it'll be over the next week to two when testing is completed.

Unidentified Analyst

Okay, great. And then last one for me on the reverse stock split you guys have talked about it and looking to get approval on can you talk about timing when that could be implemented assuming that shareholder approval comes through on that and how would you get strategically think about that.

Dennis Gilles

Well, it will be out forwarded the shareholders in the upcoming shareholder vote the annual general meeting is on September 30. At the last day of September and we're anticipating that the shareholders will approve in and what the next step would he go back to our board to determine what the exchange will be, because what we saw is a range between 1.2, 1.6 -- excuse me, 1 for 2 and 1 for 6. So the board will determine what that exchange amount will be. and then we were working with our financial advisors determined when the appropriate time to move forward with that is, and what other steps are necessary surrounding that either in advance immediately following.

Unidentified Analyst

Okay, perfect, that's helpful. Thanks for your time, guys.

Doug Glaspey

Thanks, Jeff.

Operator

Our next question comes from the line of Dan Schmitt [ph], private investor. Please proceed with your questions.

Unidentified Analyst

Good morning gentlemen. In the opening comments a quick reference was made to the stock price. Could you elaborate a little more on any -- around the stock price like a reverse click or anything of that nature. Thank you.

Kerry Hawkley

Sure two things one of them is a year ago our stock price was down in the I think high 40 our stock price today is -- So let's see August -- August 7 last year; our stock break at $0.53. Our stock write today was $0.81 so the stock prices and is appreciated since that time. We've tried to increase the visibility of the company, to a much broader audience. One of the things that we've been told along the way is that we have barriers to people buying our stock many of the existing brokerage houses won't transact our stock because were at dollar, and they have rules that prohibit that. So that's led to the second part of your question which is the share consolidation, or as you call it, reverse split; that share consolidation is something we put forward the shareholders is just noted in the earlier question and we're expecting to have a vote on that, are in annual general meeting on September 30.

Unidentified Analyst

Thank you very much.

Doug Glaspey

Sure thing, thank you for calling in.

Operator

Our next question comes from Chip Richardson from Wedbush Securities. Please go ahead with your questions.

Chip Richardson

Congratulations on a really good quarter. It seems to me that you have reoccurring pump problems particularly Raft Rivers. Is there anything that's common to those failures or is it just sort of random events.

Doug Glaspey

Thanks Chip. you know early on since you have been a shareholder for a long time, early on we did go through a number of the pump failures. This particular well it's probably one of our worst wells in the bunch but this pump ran for over 3.5 years. So we are actually pretty happy with the performance on that pump. And it's kind of a normal I guess the normal life stand for these pumps especially when they are set relatively deep, some of these pumps set 1700 or 1800 feet below the surface. And you've got all a shaft that drives that of all the way from the surface that have to be maintained so, we've come a long way from our early days. You know our shallower set pumps again a grabber RG for that pump has been in since we installed it when we started the plant in 2008 it's never been out of the hole, that is only 900 feet deep.

So pump setting depth is a big part of it, we have some learning to do the least but I think we worked almost budged up for our production punch, I don't think there's anything really unusual about the failures of this pump the line shaft variance had warrant, we saw the production falling off. We don't like running these pumps the total destruction because it costs more to fix them and you can never figure out what happened. So this one at the 3.5 years is not so unusual, I think going forward in the future we will just -- we will see pump failures but the fact of the matter is down hole pump fail over time, and it is just part of the business.

Chip Richardson

Raft River in the 10-K, there's reference to Unit 2. Is that just the well that you've had the leg to, or is that some other new unit?

Doug Glaspey

We still carry a second complete unit for the future at Raft River. Again, it's a question of market and power price and where do we put our resources right now. Raft River is low on the priority with geysers in El Ceibillo and San Emidio too at the top of our priority list for advanced development projects. We believe we still have reservoir out of Raft River for another unit, but we have to find somebody to sell that power to in Idaho and Idaho Power typically have lower power prices than we see in California and Nevada, so it's not as an attractive development.

Chip Richardson

Sounds reasonable. Can you give us a little more information on who the partner is for the Gerlack [ph] Green Energy program?

Doug Glaspey

It's a private investment group out of Reno, actually and they have the project and we came in as direct venture partner as the 60% owner. It's the fit, really just a private investment group out of Reno.

Chip Richardson

James Pathos has obviously been a big investor in the stock. Some shareholders are kind of concerned that he has been aggressive with managements in some other investments that he has made and coming from Goldman Sachs who is not particularly helpful partner, was he involved in the Goldman Sachs program when he was there and how has he been so far in working with you folks?

Doug Glaspey

I'm not aware of him being involved in the project at all during his time at Goldman Sachs.

Dennis Gilles

He certainly wasn't one of the principles we've dealt with directly at Goldman when we made that tax equity deal.

Doug Glaspey

Yes. I think that just happens to be a coincidence. We're very pleased to have him. Our understanding from talking to him is he sees the company as solid and strong and it's my understanding – his belief is that he sees little downside risk and a lot of upside opportunity. We've been pleased to see him come in and acquire the stock. I think his acquisition of stock in the open market has helped bolster our stock price. It's my understanding he currently owns 17 million shares of our stock which is about 15% of the total stock outstanding and any discussions with him have been fully supportive of the work that we've been doing and the direction that we seem to be going. We don't see those concerns that you've seen with him relative to some of those other companies.

Chip Richardson

That's very good. You're starting some wealth construction at Crescent Valley. Could you provide a little more information on that project?

Doug Glaspey

Yes. We drilled one well already back at the very end of 2014 and the early 2015 in order to qualify that project back at the time for the production tax or investment tax credit. Under this VOE grant, we've received approval and funding to go out and do additional geologic investigation and additional drilling of one well on that project, which will further advance the resource identification.

Chip Richardson

Yes. One last question. Some years ago you had graph, I believe, from the Department of Energy about testing some different methods, cold water fracturing of rocks and such at Raft River. Could anything come of that? Any report on how those sorts of new technologies or light workout?

Doug Glaspey

A report, no, that project is not completed. It is ongoing. Working with the Department of Energy and their contractors, their laps, but to date, the results have been extremely successful. When they went on to that well, our scope was to provide the well and they came in and did their magic on it. When we provided the well, it was capable of taking 20 gallons a minute of water and inject it. They have that 20 gallons a minute up to almost 1,000 gallons a minute now as a result of the efforts that they've done to open the fractures on that well. So we've been very pleased with that. That experimentation is continuing.

Chip Richardson

Very interesting. Well, thank you very much. Really appreciate you guys continuing to do a good job of delivering on your promises and looking forward to more growth in the future.

Doug Glaspey

Thanks, Chip.

Operator

Our next question comes from the line of Brian Lee with Private Management Group. Please proceed with your question.

Brian Lee

Hi, thanks for taking the question. Just one quick one for me. You stated earlier about the $20 million of debt financing, has the capability to be extended up to $50 million. What would make you stand that out and then just looking generally how you're thinking about that right now?

Doug Glaspey

Well, having that expansion for us is very handy. If we happen to have for example a strategic acquisition that we were looking at, having that funds immediately available to support that acquisition would be a good possible use of those funds. Additionally, if we were to receive our power purchase agreement on geysers and need to move forward right away on some of the acquisition of the equipment necessary for that project, again, it gives us a good source for possibly utilization of those funds. It's just really nice to have that immediately available, to tap into should the need arise. If we did go that route, obviously, there's no delusion to the shareholders in going that route. It leads us as we grow the company with multiple avenues for obtaining the capital that's necessary to grow the company.

Brian Lee

And has there a step up in interest rate at all? Or does that kind of stayed flat?

Doug Glaspey

Our understanding is the current rate is actually quite a bit lower than what the $20 million was taken at. It moves with what the market is at the time.

Brian Lee

Okay, great.

Doug Glaspey

And it's not a variable interest rate, but at the time that we draw – if we were to draw that next $30 million, it would be determined at what market is at that time.

Brian Lee

Okay, great, I understand.

Operator

It seems we have no further questions at this time. I'd like to turn the floor back over to management for closing remarks.

Dennis Gilles

Great, operator. I'd like to thank everybody. We did have a couple little setbacks this quarter, but we didn't look at them as really significant. Our focus continues to be on growing the company. We do have a number of opportunities that we're looking at and although we've stated that in the past, that continues to be our focus on pursuing those and trying to meaningfully grow this company. We've set some aggressive goals, but they're goals that we believe are achievable and we continue to focus on executing to achieve that growth.

I thank you for your interest in the company and look forward to our future calls and our upcoming annual general meeting. Thank you, everybody, and have a great day.

Operator

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

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